Picking up Nickels

Wednesday, April 19, 2017

March CPI-U numbers released: April 2017 issue I Bonds are a buy

The U.S. Bureau of Labor Statistics released the March 2017 Consumer Price Index (CPI-U) inflation data last week, which increased by 0.08% last month.

As always, now (along with the release of the September CPI-U) is one of the best times to consider purchasing I Bonds. The reason for this is that we now know what the rate of return for April 2017 I Bonds will be for both the first and second six month periods, which is important since I Bonds must be held for 12 months before they can be redeemed.

Using the CPI-U data from September 2016 (241.428) and March 2017 (243.801) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2017 issue I Bonds.

That means these bonds would earn a composite rate of 2.76% (using 0% fixed & 1.38 variable) for the first 6 months and 1.96% (using 0% fixed & 0.98% variable) for the second 6 months. Based on this, April 2017 issue I Bonds are a strong buy when compared to something like the 12 month CD @ 1.50% APY currently being offered by Connexus Credit Union.

I already maxed out my 2017 annual I Bond allotment in January and have already received the bulk of my April 2017 issue paper I Bonds from my Federal tax refund, so I'm pretty much all in at this point. :)


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